Cost submissions standards for cost reimbursable contracts

Cost submissions standards for cost reimbursable contracts are the requirements governing how a contractor reports its costs after completing a cost-reimbursable contract. For qualifying multi-year contracts, they also govern annual reporting during performance. The submission supports the buyer's review and audit of allowable costs and the certification that the final price is reasonable.

The term is a heading used in the former Government of Canada Supply Manual. It is not a separately defined NATO term. In Canadian federal procurement, the standards are carried out through contract clauses, audit clauses and, where required, cost accounting practices disclosure. The CanadaBuys guidance on cost-reimbursable contracts sets out when a submission is needed.

How cost-reimbursable contracts work

A cost-reimbursable contract reimburses the contractor for allowable costs incurred in performing the work, subject to the contract's terms. The CanadaBuys page on cost-reimbursable basis of payment describes this model.

NATO's Procurement Manual takes a similar view. It says cost-reimbursement contracts pay allowable incurred costs to the extent prescribed in the contract. They suit requirements whose costs cannot be estimated accurately enough for fixed pricing. The manual also expects an adequate contractor accounting system and appropriate oversight and cost controls. See the NATO Procurement Manual.

When a cost submission is required

CanadaBuys states that every cost-reimbursable contract requires a cost submission when the contract is completed. Multi-year cost-reimbursable contracts generally require an annual cost submission as a mandatory deliverable.

Repair and overhaul services are the exception for annual submissions. For these contracts, the contracting officer or audit agency may decide whether a cost submission is required as a deliverable.

The Supply Manual identifies Standard Acquisition Clauses and Conditions (SACC) clause C0300C as the mechanism that requires a contractor's cost submission after completion of a cost-reimbursable contract. The Supply Manual edition carries the clause reference.

Audit clauses and the $50,000 threshold

Solicitations with cost-reimbursable elements must contain the appropriate audit clause. Where the final price is based on actual costs incurred after completion, a cost-reimbursable contract over $50,000 requires an audit for price certification. Both points are set out in the CanadaBuys guidance on audit clauses.

The audit lets the Government of Canada validate the costs claimed and establish that the price is reasonable. The cost submission is the contractor's record of those costs.

Provisional pricing and cost accounting practices

A contract may begin on a cost-reimbursable basis and later move to fixed pricing. In that case, the contractor's milestone declaration must include a cost submission where the contract requires it. The CanadaBuys page on provisional price explains the arrangement.

Where pricing is based on estimated or actual costs, the buyer may also require a Cost Accounting Practices (CAP) submission. A CAP submission is a formal disclosure of the contractor's cost-accounting practices, including direct and indirect costs and the methods used to allocate indirect costs. See analyze and negotiate costs on CanadaBuys.

What this means for a supplier

Treat the cost submission as a contract deliverable, not an afterthought. The governing clause and the solicitation control the obligations, so a supplier should:

• Identify the cost-submission clause and its deadline in the solicitation or contract.
• Keep accounting records that separately support allowable direct and indirect costs charged to the contract.
• Submit the completion or annual cost report as a mandatory deliverable where the contract says so.
• Retain records and cooperate with the government audit.
• Provide a CAP submission if the contracting authority requires one.